The Shanghai Gold Exchange's (SGE) push to internationalize its physically settled contracts is expected to accelerate the outflow of bullion from Western vaults, highlighting the structural flaws of Western gold markets. COMEX, the dominant US futures exchange, relies heavily on paper trading and rehypothecation, while SGE mandates physical settlement for the majority of its trades. China's move to internationalize SGE deliveries is seen as a geopolitical strategy to redirect global bullion flows away from Western financial centers. As SGE's infrastructure expands, Western vaults face the risk of paper claims on gold exceeding retrievable supply, while physical stockpiles move east.